conference date: February 9, 2016 @ 1:30 PM Pacific Time
for quarter ending: December 30, 2015 (fourth quarter, Q4)
Overview: Revenue continues to climb rapidly, but also spending more on R&D, so still quite a ways from break-even. Beat Q4 expectations.
Basic data (GAAP):
Revenue was $93.5 million, up 11% sequentially from $84.1 million, and up 26% from $74.3 million in the year-earlier quarter.
Net income was negative $24.9 million, up sequentially from negative $26.4 million, and down from negative $26.7 year-earlier.
EPS (earnings per share, diluted) were negative $0.18, up sequentially from negative $0.21 and up from negative $0.22 year-earlier.
Full year 2016 revenue is expected to rise to $390 to $430 million. Adcetris net product sales range between $255 and $275 million. Collaboration and license revenue $75 to $90 million. Royalty revenue range $60 to $65 million including a $20 million one-time milestone payment in Q1. R&D expense $360 to $400 million. SG&A expense $135 to $145 million. Cost of sales 10% to 12% of Adcetris net product revenue. $65 to $75 million non-cash costs, mainly for share-based compensation.
Working on building Adcetris into a blockbuster for CD30 positive cancers. Achieved a $20 million milestone payment from Takeda for surpassing $200 million in annual sales, which will be recognized as revenue in Q1.
Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (relapsed HL and relapsed systemic ALCL) in the quarter were $63.0 million, up 7% sequentially from $59.1 million, and up 35% from $46.5 million year-earlier.
Collaboration and license revenue was $17.9 million, up 17% sequentially from $15.3 million, and up 12% from $16.0 million year-earlier.
Royalty revenue was $12.6 million, up 30% sequentially from $9.7 million, and up 6% from $11.9 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 60 non-U.S. nations. The royalty rate will go up in Q2 following the $200 million milestone.
ECHELON-1 (frontline HL) and ECHELON-2 (mature T-cell lymphoma) Adcetris Phase 3 trials are now under an amended SPA from the FDA, with enrollment completed in E-1. E-2 enrollment should complete in 2016, with data readouts in 2017 and 2018.
At the American Society of hematology (ASH) reported on clinical trial for cd-30 expressing lymphomas. "There are more than 70 ongoing clinical trials being conducted globally with Adcetris."
ALCANZA Phase 3 trial for patients with CD30-expressing cutaneous T-cell lymphoma (CTCL) who have received prior systemic therapy completed enrollment.
In collaboration with Bristol-Myers Squibb, a Phase 1 / 2 trials to test Adcetris with checkpoint inhibitor Opdivo (nivolumab) in relapsed or refractory HL and in B-cell and T-cell non-Hodgkin lymphomas continued to enroll patients.
Takeda received EU approval for Adcetris for relapsed or refractory HL or sALCL who previously responded to Adcetris but who later relapsed.
A Phase 1 trial of SEA-CD40 for solid tumors continues.
SGN-CD33A for AML (acute myeloid leukemia) continued a phase 1b trial for newly diagnosed AML, with additional data due out later this year. Additional indications for 33A are planned. Phase 1 data was reported showing activity and tolerability for AML. Presentations were made at ASH, including data for 33A in combination with HMAs for older AML patients, and a Phase 3 trial based on this is planned for Q3 2016. In the quarter a Phase 1/2 trial started for 33A as monotherapy for AML as a pre-conditioning regimen prior to stem cell transplants and for maintenance after the transplants. An MDS trial will also start in the near future.
SGN-CD19A for second line DLBCL Phase 2 trial started, using Rituxan with or without CD19A. Another SGN-CD19A phase 2 trial for relapses or refractory DLBCL in combination with a salvage treatment was initiated. A Phase 2 frontline DLBCL trial is also planned for 2016.
SGN-LIV1A interim Phase 1 data demonstrated activity in heavily pretreated patients with triple negative breast cancer. Additional patients are being enrolled.
The AbbVie collaboration was extended to Seattle Genetics PBD dimer and EC-mAb technologies. AbbVie made a milestone payment after an auristatin ADC Phase 1 trial for solid tumors was initiated.
Other trials to extend the Adcetris label are underway. Other ADCs (antibody-drug conjugates) are also under development, including SGN-LIV1A for breast cancer.
Seattle Genetics received a milestone payment from Genentech following the initiation of a Phase 1 trial.
Seattle Genetics is now developing ADCs for immunological diseases and is also looking for further ways to expand the ADC platform.
Preclinical programs were also discussed on the call.
See also Seattle Genetics pipeline.
Cash ended at $712.7 million, down sequentially from $736.5 million. There was no debt.
Total costs and expenses were $118.6 million, consisting of: cost of sales $6.7 million; cost of royalty revenue $3.7 million, R&D $74.6 million; selling, general and administrative expense $33.6 million. Resulting in a loss from operations of $25.1 million. Other income $0.3 million.
Adcetris has a CTCL compendia listing, so what is the incremental opportunity from the Alcanza trial? We are delighted to be listed in guidelines, but we can't sell without it being on the label. The study is accrued and we will have a data readout this year.
CD33A breakthrough designation in AML? We are on track with 33A with a different mechanism of action from venetaclax and other competitors. We have a higher response rate than you would get with HMAs alone, as reported at ASH. We can't comment on breakthrough designation discussions. 33A is expressed on almost all AML cells, so it should be good in combination therapies.
2016 guidance, are any additional listings included in that? Alcanza trial should have data, but don't expect label expansion until 2017. Other collaborations and milestones are moving forward. Often we get the news at the same time you do. In guidance we try to use probability estimates of the milestones, which are included. We included no new compendia listings in the guidance. The first quarter typically reflects the highest royalty rate, then resets to the lower rates in Q2, followed by possible rate increases as the year progresses.
Checkpoint combinations statement? We have shown some data for ADCs with Oristatin where killing cells results in antigen releases that can activate the immune system.
33A updates later this year? We will do the updates at the appropriate medical conferences. Survival updates should be included. There is growing evidence that MRD (minimal residual disease) can predict for cures or prolonged survival, and we will provide that data.
The relatively slow growth in Adcetris revenue guidance in 2016 reflects strong comps with 2015. Faster growth should come when/if we get label expansions.
Hodgkin Lymphoma competitive environment? Devolomab is a fine drug for HL patients. Their breakthrough designation is post Adcetris. In the not too distant future we will put out our data for frontline HL, which is where the big market opportunity is. We would hope to cure more patients in frontline, so there would be less second line & etc. patients.
Our duration of therapy remains about 6 cycles.
Assumptions about price increases? We did take a price increase in January. About 40% of our business is covered by the government, where price increases are limited by inflation.
When might we see a LIV1 update? It is too early to say, maybe at San Antonio.
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